Bank of America and Citibank have announced that they will stop automatically enrolling its checking account customers into costly debit card and ATM overdrafts. The move comes as the Federal Reserve begins to roll out new rules that prohibit banks from automatically enrolling customers into overdraft protection schemes without their prior permission. However, the rules have failed to address the issue of possible deceptive practices employed by banks to lure customers into opting-in to an overdraft program which may be costly. The new rules also don't address how large the overdraft fees can be or how frequently they can charge a customer after they customer has opted into the system.
The average overdraft fee is $34 and that is regardless of how much the actual overdraft fee is. A matter of fact the after amount that a customer overdrafts their account by is around $17. So imagine paying $34 to cover an overdraft amount of $17 or less. That's just abusive and it is very disappointing that the Federal Reserve has failed to address this type of abusive pricing on overdraft fees on bank accounts. When debit cards were first introduced they were designed to be convenient and safe alternatives to credit cards and as recently as 2004, 80 percent of overdrafts were denied. However, now the banking industry seems to have made an entire business out of charging customers overdraft fees. Banks and credit unions have collected over $24 billion every year just in overdraft fees collected from their bank account customers. Hopefully, the Federal Reserve will amend the new rules governing overdrafts and regulate how much and how often bank account customers can be charged.